Intrinsic value of Monolithic Power Systems, Inc. - MPWR

Previous Close

$144.95

  Intrinsic Value

$66.47

stock screener

  Rating & Target

str. sell

-54%

Previous close

$144.95

 
Intrinsic value

$66.47

 
Up/down potential

-54%

 
Rating

str. sell

We calculate the intrinsic value of MPWR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.60
  17.24
  16.02
  14.91
  13.92
  13.03
  12.23
  11.50
  10.85
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
Revenue, $m
  690
  809
  939
  1,079
  1,229
  1,389
  1,559
  1,739
  1,927
  2,125
  2,332
  2,548
  2,774
  3,008
  3,252
  3,506
  3,769
  4,043
  4,328
  4,624
  4,932
  5,252
  5,585
  5,931
  6,292
  6,668
  7,060
  7,469
  7,896
  8,341
Variable operating expenses, $m
  469
  549
  637
  732
  834
  942
  1,057
  1,179
  1,307
  1,441
  1,581
  1,727
  1,880
  2,039
  2,204
  2,376
  2,555
  2,741
  2,934
  3,134
  3,343
  3,560
  3,785
  4,020
  4,265
  4,520
  4,785
  5,062
  5,352
  5,653
Fixed operating expenses, $m
  78
  79
  81
  83
  85
  87
  89
  90
  92
  94
  97
  99
  101
  103
  105
  108
  110
  112
  115
  117
  120
  123
  125
  128
  131
  134
  137
  140
  143
  146
Total operating expenses, $m
  547
  628
  718
  815
  919
  1,029
  1,146
  1,269
  1,399
  1,535
  1,678
  1,826
  1,981
  2,142
  2,309
  2,484
  2,665
  2,853
  3,049
  3,251
  3,463
  3,683
  3,910
  4,148
  4,396
  4,654
  4,922
  5,202
  5,495
  5,799
Operating income, $m
  144
  181
  221
  264
  311
  360
  413
  469
  528
  590
  655
  722
  793
  866
  943
  1,022
  1,105
  1,190
  1,280
  1,372
  1,469
  1,569
  1,674
  1,783
  1,896
  2,015
  2,138
  2,267
  2,401
  2,541
EBITDA, $m
  159
  198
  241
  287
  337
  390
  446
  506
  568
  634
  703
  775
  850
  928
  1,010
  1,095
  1,183
  1,274
  1,369
  1,468
  1,571
  1,678
  1,790
  1,906
  2,027
  2,153
  2,284
  2,421
  2,565
  2,714
Interest expense (income), $m
  0
  0
  2
  3
  5
  7
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  38
  42
  45
  49
  53
  58
  62
  66
  71
  76
  81
  87
  92
  98
  104
Earnings before tax, $m
  144
  179
  217
  259
  304
  351
  402
  455
  511
  570
  633
  697
  765
  835
  908
  984
  1,063
  1,145
  1,230
  1,319
  1,411
  1,508
  1,608
  1,712
  1,820
  1,933
  2,051
  2,174
  2,303
  2,437
Tax expense, $m
  39
  48
  59
  70
  82
  95
  108
  123
  138
  154
  171
  188
  206
  225
  245
  266
  287
  309
  332
  356
  381
  407
  434
  462
  491
  522
  554
  587
  622
  658
Net income, $m
  105
  131
  159
  189
  222
  256
  293
  332
  373
  416
  462
  509
  558
  610
  663
  718
  776
  836
  898
  963
  1,030
  1,100
  1,173
  1,250
  1,329
  1,411
  1,497
  1,587
  1,681
  1,779

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  589
  690
  801
  921
  1,049
  1,185
  1,330
  1,483
  1,644
  1,813
  1,990
  2,174
  2,367
  2,567
  2,775
  2,991
  3,216
  3,450
  3,693
  3,945
  4,208
  4,481
  4,765
  5,061
  5,369
  5,689
  6,024
  6,373
  6,737
  7,117
Adjusted assets (=assets-cash), $m
  589
  690
  801
  921
  1,049
  1,185
  1,330
  1,483
  1,644
  1,813
  1,990
  2,174
  2,367
  2,567
  2,775
  2,991
  3,216
  3,450
  3,693
  3,945
  4,208
  4,481
  4,765
  5,061
  5,369
  5,689
  6,024
  6,373
  6,737
  7,117
Revenue / Adjusted assets
  1.171
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.173
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
  1.172
Average production assets, $m
  179
  210
  243
  279
  318
  360
  404
  450
  499
  550
  604
  660
  718
  779
  842
  908
  976
  1,047
  1,121
  1,198
  1,277
  1,360
  1,446
  1,536
  1,630
  1,727
  1,829
  1,934
  2,045
  2,160
Working capital, $m
  146
  171
  198
  228
  259
  293
  329
  367
  407
  448
  492
  538
  585
  635
  686
  740
  795
  853
  913
  976
  1,041
  1,108
  1,178
  1,251
  1,328
  1,407
  1,490
  1,576
  1,666
  1,760
Total debt, $m
  29
  60
  94
  131
  171
  213
  258
  305
  355
  407
  462
  519
  578
  640
  704
  771
  840
  913
  988
  1,066
  1,147
  1,231
  1,319
  1,410
  1,506
  1,605
  1,708
  1,816
  1,928
  2,046
Total liabilities, $m
  182
  213
  248
  284
  324
  366
  411
  458
  508
  560
  615
  672
  731
  793
  857
  924
  994
  1,066
  1,141
  1,219
  1,300
  1,385
  1,472
  1,564
  1,659
  1,758
  1,861
  1,969
  2,082
  2,199
Total equity, $m
  407
  477
  554
  636
  725
  819
  919
  1,025
  1,136
  1,253
  1,375
  1,502
  1,635
  1,774
  1,917
  2,067
  2,222
  2,384
  2,552
  2,726
  2,908
  3,096
  3,293
  3,497
  3,710
  3,931
  4,163
  4,404
  4,655
  4,918
Total liabilities and equity, $m
  589
  690
  802
  920
  1,049
  1,185
  1,330
  1,483
  1,644
  1,813
  1,990
  2,174
  2,366
  2,567
  2,774
  2,991
  3,216
  3,450
  3,693
  3,945
  4,208
  4,481
  4,765
  5,061
  5,369
  5,689
  6,024
  6,373
  6,737
  7,117
Debt-to-equity ratio
  0.070
  0.130
  0.170
  0.210
  0.240
  0.260
  0.280
  0.300
  0.310
  0.320
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.410
  0.410
  0.420
Adjusted equity ratio
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691
  0.691

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  105
  131
  159
  189
  222
  256
  293
  332
  373
  416
  462
  509
  558
  610
  663
  718
  776
  836
  898
  963
  1,030
  1,100
  1,173
  1,250
  1,329
  1,411
  1,497
  1,587
  1,681
  1,779
Depreciation, amort., depletion, $m
  15
  17
  20
  23
  26
  29
  33
  37
  41
  45
  48
  53
  57
  62
  67
  73
  78
  84
  90
  96
  102
  109
  116
  123
  130
  138
  146
  155
  164
  173
Funds from operations, $m
  120
  148
  179
  212
  248
  286
  326
  369
  414
  461
  510
  562
  616
  672
  730
  791
  854
  920
  988
  1,059
  1,133
  1,209
  1,289
  1,372
  1,459
  1,550
  1,644
  1,742
  1,845
  1,952
Change in working capital, $m
  23
  25
  27
  30
  32
  34
  36
  38
  40
  42
  44
  46
  48
  49
  51
  54
  56
  58
  60
  62
  65
  68
  70
  73
  76
  79
  83
  86
  90
  94
Cash from operations, $m
  97
  123
  152
  183
  216
  252
  290
  331
  374
  419
  467
  516
  568
  622
  679
  737
  798
  862
  928
  996
  1,068
  1,142
  1,219
  1,299
  1,383
  1,470
  1,561
  1,656
  1,755
  1,858
Maintenance CAPEX, $m
  -12
  -14
  -17
  -19
  -22
  -25
  -29
  -32
  -36
  -40
  -44
  -48
  -53
  -57
  -62
  -67
  -73
  -78
  -84
  -90
  -96
  -102
  -109
  -116
  -123
  -130
  -138
  -146
  -155
  -164
New CAPEX, $m
  -28
  -31
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -93
  -97
  -102
  -106
  -110
  -115
Cash from investing activities, $m
  -40
  -45
  -51
  -55
  -61
  -66
  -73
  -78
  -85
  -91
  -98
  -104
  -111
  -118
  -125
  -133
  -141
  -149
  -158
  -167
  -176
  -185
  -195
  -206
  -216
  -227
  -240
  -252
  -265
  -279
Free cash flow, $m
  57
  78
  101
  127
  155
  185
  218
  252
  289
  328
  369
  412
  457
  504
  553
  604
  657
  713
  770
  830
  892
  957
  1,024
  1,094
  1,167
  1,242
  1,321
  1,404
  1,490
  1,579
Issuance/(repayment) of debt, $m
  29
  31
  34
  37
  40
  42
  45
  47
  50
  52
  55
  57
  59
  62
  64
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  112
  117
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  29
  31
  34
  37
  40
  42
  45
  47
  50
  52
  55
  57
  59
  62
  64
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  112
  117
Total cash flow (excl. dividends), $m
  86
  109
  135
  164
  194
  227
  262
  300
  339
  380
  424
  469
  516
  566
  618
  671
  727
  785
  845
  908
  973
  1,041
  1,112
  1,185
  1,262
  1,342
  1,425
  1,511
  1,602
  1,697
Retained Cash Flow (-), $m
  -64
  -70
  -76
  -83
  -89
  -94
  -100
  -106
  -111
  -117
  -122
  -127
  -133
  -138
  -144
  -150
  -155
  -162
  -168
  -174
  -181
  -189
  -196
  -204
  -213
  -222
  -231
  -241
  -252
  -263
Prev. year cash balance distribution, $m
  297
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  319
  39
  59
  81
  106
  133
  162
  194
  228
  264
  302
  342
  384
  428
  474
  522
  572
  623
  677
  734
  792
  852
  915
  981
  1,049
  1,120
  1,194
  1,270
  1,351
  1,434
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  306
  36
  51
  67
  82
  96
  110
  121
  131
  138
  143
  146
  146
  144
  139
  133
  124
  115
  104
  93
  82
  71
  60
  50
  41
  33
  26
  20
  15
  11
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Monolithic Power Systems, Inc. designs, develops and markets integrated power semiconductor solutions and power delivery architectures. The Company operates in the design, development, marketing and sale of power solutions for the communications, storage and computing, consumer and industrial markets segment. The Company's product families include Direct Current (DC) to DC Products, and Lighting Control Products. The Company's DC to DC integrated circuits (ICs) are used to convert and control voltages within a range of electronic systems, such as portable electronic devices, wireless local area network (LAN) access points, computers, monitors, automobiles and medical equipment. Lighting control ICs are used in backlighting and general illumination products. In addition to Alternating Current (AC)/DC offline solutions for lighting illumination applications, the Company also offers AC/DC power conversion solutions for end products that plug into a wall outlet.

FINANCIAL RATIOS  of  Monolithic Power Systems, Inc. (MPWR)

Valuation Ratios
P/E Ratio 111.6
Price to Sales 15.2
Price to Book 13.7
Price to Tangible Book
Price to Cash Flow 54.7
Price to Free Cash Flow 83.3
Growth Rates
Sales Growth Rate 16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 131.3%
Cap. Spend. - 3 Yr. Gr. Rate 18.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 13.3%
Ret/ On T. Cap. - 3 Yr. Avg. 11.2%
Return On Equity 13.3%
Return On Equity - 3 Yr. Avg. 11.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 54.2%
Gross Margin - 3 Yr. Avg. 54.1%
EBITDA Margin 18.5%
EBITDA Margin - 3 Yr. Avg. 17.5%
Operating Margin 14.1%
Oper. Margin - 3 Yr. Avg. 13.1%
Pre-Tax Margin 14.7%
Pre-Tax Margin - 3 Yr. Avg. 13.3%
Net Profit Margin 13.6%
Net Profit Margin - 3 Yr. Avg. 12.2%
Effective Tax Rate 7%
Eff/ Tax Rate - 3 Yr. Avg. 8.8%
Payout Ratio 62.3%

MPWR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPWR stock intrinsic value calculation we used $582 million for the last fiscal year's total revenue generated by Monolithic Power Systems, Inc.. The default revenue input number comes from 0001 income statement of Monolithic Power Systems, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MPWR stock valuation model: a) initial revenue growth rate of 18.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MPWR is calculated based on our internal credit rating of Monolithic Power Systems, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Monolithic Power Systems, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MPWR stock the variable cost ratio is equal to 67.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $76 million in the base year in the intrinsic value calculation for MPWR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Monolithic Power Systems, Inc..

Corporate tax rate of 27% is the nominal tax rate for Monolithic Power Systems, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MPWR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MPWR are equal to 25.9%.

Life of production assets of 12.5 years is the average useful life of capital assets used in Monolithic Power Systems, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MPWR is equal to 21.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $640.093 million for Monolithic Power Systems, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 42.948 million for Monolithic Power Systems, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Monolithic Power Systems, Inc. at the current share price and the inputted number of shares is $6.2 billion.

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